White House National Economic Council Director Larry Kudlow on the U.S.-China trade talks where recontact has been established and now officially restarted. As noted, President Trump is in no hurry; the status-quo is leverage in our favor.
Additionally Director Kudlow discusses the potential benefits of the USMCA trade deal and whether the Federal Reserve should lower interest rates.

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Regarding “inflation” these pundits just don’t get it.  For over three years CTH has been explaining how President Trump’s maganomic policy would reverse three decades of stagnant Main Street economic growth.  The Bureau of Economic Analysis (BEA) consistently confirms our earlier predictions releasing data where inflation is essentially nonexistent.
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Today, July 1st, is the first day of the third quarter 2019.  As typical some of the earliest economic reporting from June is released.  One of the first reports comes from the Institute for Supply Management (ISM) as they compile the manufacturing sector.

As noted in the ISM review, manufacturing growth remains strong with an overall index of 51.7 (anything above 50 is growth), and the results are stronger than initially predicted by the financial media (Wall Street).
The manufacturing production index for June is 54.1 versus last month’s 51.3 (May); generally this means manufacturing outputs are growing, order backlogs are being reduced, orders are being fulfilled faster.  This is an indication that new production investment is now coming on-line and delivering actual products from orders.
In the past CTH had noted the heavy Main Street investment which began in 2017 would start to come on-line in Q2 2019, it generally takes about two years for a new manufacturing facility to start producing, and then increases in production efficiency follow.  The ISM result shows we were pretty close with that forecast.
Within the review there are particular notes for additional interest.  First, the June manufacturing employment index is 54.5, very strong; (last month 53.7).  In essence manufacturers are hiring at a fast rate.  One cause is better weather (seasonal), and the majority cause is filling the jobs from new production facilities coming on-line.
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During an earlier G20 discussion of technology in a fast digital age, President Trump highlighted the potential security compromises with the new 5G communication network.  This was an indirect shot toward China and the controversy surrounding Huawei with China’s Chairman Xi Jinping only separated from Trump by Prime Minister Shinzo Abe.

It would appear President Trump is in full confrontation mode, albeit diplomatically, as the highly anticipated meeting between Trump and Xi is going to take place at 10:30pm tonight.  We are likely, heck, almost guaranteed, to see a complete reversal in position between the two leaders as President Trump wears the panda mask to cover the Eagle glare.  This truly is the dance with the dragon.
After several years of background strategy, President Trump now has Chinese Chairman Xi Jinping in a tenuous position while the ramifications of the U.S-China trade dispute unfold around him and seemingly begin to collapse the One-Belt/One-Road supply chain Beijing has carefully planned.  Actual manufacturing and investment is now retreating from China as the U.S. President continues to use access to the U.S. market as leverage to retract the tentacles of Chinese economic expansion.
President Trump has a quiver full of economic arrows that are available to him; not the least of which is the possibility of enhanced tariffs toward even more Chinese products. Beijing cannot keep subsidizing industry to keep position, they are bleeding cash and the threats against Western corporations have only made matters worse.
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Justin from Canada travels to the White House for a conversation with President Trump about the USMCA deal, ratification, and a request from Canada for assistance in their conflict with China.  The relationship between President Trump and the arrogant Justin from Canada is tenuous at best.  [Video and Transcript]

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[Transcript] 12:10 P.M. EDT – PRESIDENT TRUMP: Well, thank you very much. We had some good news. The market hit a all-time high today. The S&P just broke its record, so we’re very happy about that. The stock market continues to do well. Jobs have been literally through the roof. And, speaking of jobs, we have the USMCA with Canada, with Mexico. And we’ve come a long way. It’s a great agreement. As you know, Mexico, yesterday, approved it.
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The construct of the USMCA was always anticipated to sail through ratification in Mexico because, well, quite frankly, the USMCA is specifically structured to provide great benefit toward Mexico. It’s not because the language within the USMCA favors Mexico, but rather the rules are centered around deregulating industry, and lifting wages.
The rules-of-origin, in combination with mandated minimum wage rates attached to the manufacturing sector; and the fact that Mexico has the lowest current wage rates in North American; specifically means that Mexican workers stand to get the biggest financial benefits… and that’s ok.  Trump, Lighthizer and Ross designed it that way.

The U.S. benefits when the Mexican wage rates are raised.  Heck, there was a time in the early negotiations, after Canada was kicked out of the room, when Secretary Wilbur Ross was advocating for an $11/hr minimum wage in Mexico, and the Mexicans were like ‘whoa, wait a minute, too high, too high’… [It was quite funny, because Trump was being called racist simultaneous to him trying to give a $85/day pay raise to Mexicans (from $3/day)].

MEXICO CITY (Reuters) – Mexico on Wednesday became the first country to ratify the United States-Mexico-Canada Agreement (USMCA) agreed late last year to replace the North American Free Trade Agreement (NAFTA) at the behest of U.S. President Donald Trump.

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This is interesting… but not simply because of the surface visibility.  Yesterday there was an event in Charlotte, North Carolina, that brought together Apple CEO Tim Cook, Commerce Secretary Wilbur Ross, U.S. Workforce policy advocate Ivanka Trump and U.S. CoC President Tom Donohue (on the margin).

Today, Apple Inc announces a restructuring of their supply chain away from China. In the media report notice the nations that likely stand to gain, and reference Trump’s 2017 golden ticket tour of Asia.

(Reuters) – Apple Inc has asked its major suppliers to assess the cost implications of moving 15%-30% of their production capacity from China to Southeast Asia as it prepares for a restructuring of its supply chain, according to a Nikkei Asian Review report on Wednesday.
Apple’s request was a result of the extended Sino-U.S. trade dispute, but a trade resolution will not lead to a change in the company’s decision, Nikkei said s.nikkei.com/31zCGhw, citing multiple sources.

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National Economic Council Chairman Larry Kudlow appears on Fox News immediately following the announcement that President Trump and Chairman Xi will have an “extended meeting” at the G20.

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While previously pledged support for the Northern Triangle region related to Homeland Security and combating organized crime will continue, the State Department suspends any further financial assistance ($200 million) until the migration crisis is resolved.

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[Transcript at 01:28] “Next, I have a quick update for you on U.S. foreign assistance to the Northern Triangle countries of El Salvador, Guatemala, and Honduras. As you know, in March, the President concluded these countries have not effectively prevented illegal migrants from coming to the United States.”
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Charles Payne, filling in for Maria Bartiromo, interviews White House Manufacturing and Trade Policy advisor Peter Navarro.  Unfortunately the interview begins with a discussion of tariff polling….  The vast majority of Americans have no understanding of the impact of tariffs and/or MAGAnomic policy; they only know the economic outcomes they can feel.
Mr. Navarro walks through how tariffs interact with global supply chains and the financial manipulation by multinational corporate interests.

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Apparently Justin from Canada is coming to the White House for a meeting with President Trump…

WHITE HOUSE – President Donald J. Trump will welcome Prime Minister Justin Trudeau of Canada to the White House on June 20, 2019. The visit will reaffirm America’s deep partnership with Canada, and allow the two leaders to address opportunities and challenges related to expanding bilateral cooperation.
President Trump and Prime Minister Trudeau will discuss the shared economic interests of their countries, including the United States-Mexico-Canada Agreement and opportunities to drive more growth and create jobs in both the United States and Canada. The two leaders will also discuss the upcoming G20 Summit, which will take place from June 28 to 29 in Osaka, Japan. (read more)

Last month, Manny Montenegrino had a good discussion with Ezra Levant about the current issues with the relationship between Justin from Canada and President Trump.  Against the backdrop of this upcoming visit, it’s worth revisiting:
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